More JCCs Outsource Centers to For-Profits

SAN FRANCISCO — On a typical mid-morning at the Jewish Community Center of San Francisco (JCCSF), you're likely to see a similar scene — a mother balancing a toddler on one hip while ordering a latté from the resident coffee shop, a group of seniors clustered around a closed door eagerly awaiting their workshop to start, or a gaggle of preschoolers following their teacher to the outdoor science area. You're also likely to see people of all races, religions and ages donned in shorts, T-shirts and sneakers ready to work out.

This latter group makes up a portion of the JCCSF's full membership of 8,700 adults. Since Club One, a for-profit club company headquartered in San Francisco that manages fitness sites as well as runs its own branded health clubs in California, took over the fitness component of the JCCSF, the 42,000-square-foot Koret Center for Health, Fitness & Sport has been at full capacity. For the past year, the center has had a waiting list to join, and all new JCCSF members are assigned a deferred start date. Retention is about 80 percent annually, says Aaron Rosenthal, communications manager for the JCCSF.

“Members know Club One is operating the fitness center, but they're members of the JCC,” he says. “Frankly, I think the relationship has helped the center's reputation.”

This new type of for-profit, nonprofit relationship is becoming more common, even though for a number of years, for-profit facility owners have voiced concern about competing with nonprofits, who have tax-exempt status.

However, since the JCCSF opened its new facility in January 2004 (Club One began consulting for the new fitness center in 2002), most of the concern about the relationship has been voiced from the nonprofit side, Rosenthal says.

“It's still a sensitive subject, and we've gotten a lot of resistance” he says. “It's the philosophy that you shouldn't be too overly commercial.”

The JCC Association in New York has no official numbers on how many JCCs have contracted with for-profit fitness companies, says Miriam Rinn, communications manager for the JCC Association.

“This is a relatively recent development, so we don't have solid information yet about the results or trend lines,” she says. “Accordingly, we have no official stance. Each JCC is an independent institution and sets its own management policies.”

Club One has also worked with the Peninsula JCC in Foster City, CA; the Addison-Penzak JCC in Los Gatos, CA; and the India Community Center in Milpitas, CA. Recently, Club One consulted with the St. Louis JCC for its $3 million renovation of the Marilyn Fox Building in Chesterfield, MO.

“We do a full evaluation of their operations and programming and determine what opportunities exist and what things they can do better with our training and best practices,” says Tom Nelson, director of community centers for Club One. “We look at what they can do to reach their goals without us managing.”

Plus One Health Management Inc., another for-profit fitness management company best known for its work with Fortune 500 clients, manages the fitness facility at the JCC MetroWest in New Jersey. The company has also consulted with about 10 other JCCs, says Tom Maraday, senior vice president of Plus One.

“It's harder to compete with bigger national players that are out in the marketplace now, both in size and also in price and the types of services and diversity of what they can offer,” he says. “That's one of the biggest reasons nonprofits are outsourcing.”

WTS International, also a consulting and management firm, has worked with nonprofits but was unavailable for comment.

The agreements between for-profit companies and JCCs differ on a case-by-case basis. At the JCCSF, Club One operates the fitness center entirely, from the hiring of fitness professionals and staff to the maintenance of equipment. Nonprofits who outsource their fitness centers to Club One pay a management fee and then typically an incentive fee ased on success and goals reached, Nelson says.

Due to nonprofits' tax-exempt status, the incentive fee can't exceed service fees and must stay within the parameters of a nonprofit. Because Club One is a for-profit, it also pays certain applicable taxes. For example, at the JCCSF, Club One pays a San Francisco business tax that requires for-profits to pay 1.5 percent of its entire payroll, Nelson says.

Club One's work with the JCCs is not a conflict of interest with the company's 18 clubs, Nelson says, because each facility's membership is comprised of a different demographic. Overall, the relationship is a win-win for both sides, he says.

“Some say that it's unfair to compete with a for-profit, but this is a way we can share in the success,” he says. “You have a for-profit working with a nonprofit to earn a management fee and still do business that supports the nonprofit. It's a symbiotic relationship.”